Cease and desist order issued to Nevada company with $17 million in outstanding investor returns
DENVER — Acting Colorado Securities Commissioner David Cheval has signed an order against Nevada-based CapSource, Inc. (“CapSource”) and listed control person Steven J. Byrne. The order directs Byrne and CapSource to immediately cease and desist all violations of the Colorado Securities Act, to include the use of unlicensed sales representatives to solicit and sell unregistered, non-exempt securities.
According to the Division of Securities, part of the Department of Regulatory Agencies (DORA), the respondents offered and sold at least $21,500,000 to over 200 Colorado investors over a period of four years between 2015 and 2019. Individuals were solicited to purchase investments in what was called the “CapSource Note Program,” billed as a guaranteed, pooled, fixed-rate, commercial mortgage investments that meet the definition of securities in Colorado. However, the note program products were never registered with the Division of Securities, nor were they exempt from registration.
Further, lead finders used to locate potential investors, and sales representatives used to promote and sell investments in the program were not licensed to do so in Colorado, as required by the Colorado Securities Act. These lead finders and representatives, at least one of whom was based in Colorado, also received fees for their services, in violation of Colorado statute.
As of April 2019, approximately $17,000,000 in funds remained outstanding with at least 185 of the participating Colorado investors.
“It’s always hard to see people lose money on investments that were pitched as ‘guaranteed’ to produce a profit,” stated Acting Commissioner Cheval. “All we can do is remind people to do their due diligence and check the license of whomever they’re dealing with, as well as the registration of any product they’re considering in the securities market. It’s the best way to make sure your money doesn’t fall into the wrong hands.”
The order, signed on November 1, 2019 permits the commissioner to ensure compliance with the order, and grants the commissioner authority to enter additional orders against the Respondents.